Mumbai: The Indian rupee was largely subdued and expected to open with minimal change on Friday as traders positioned themselves ahead of the Reserve Bank of India’s (RBI) highly anticipated policy announcement, with a backdrop of cautious global sentiment keeping upside limited.
The rupee’s one-month non-deliverable forward (NDF) suggested that the currency would remain near its previous close of around ₹90.36 against the US dollar, indicating a narrow trading range to start the day. Market participants noted that recent strength following a US-India trade deal rally has been checked by risk-off flows and a broadly firm dollar, which has made it difficult for the rupee to push decisively stronger.
Investors across currency and equity markets have adopted a cautious stance ahead of the RBI’s policy review outcome, widely expected later on Friday. In polls of economists, a strong majority have forecast that the central bank will maintain the repo rate at its current level of 5.25 per cent, choosing to hold steady amid mixed economic signals.
The backdrop to this cautious outlook includes a range of domestic and international forces. On the domestic front, the rupee has exhibited volatility in recent weeks, trading between roughly 89 and 92 against the dollar as global risk sentiment fluctuates, and foreign institutional investor flows ebb and flow. Global pressures including equities weakening in Asia and firm demand for safe-haven assets such as the US dollar and Treasuries have further constrained aggressive currency moves.
Traders point to the psychological significance of the ₹90 per dollar benchmark, which has repeatedly acted as resistance during recent attempts by the rupee to strengthen. “There is buy interest (to buy dollars) at near the 90 level,” a Mumbai-based currency dealer said, highlighting how technical barriers are reinforced by macro risk aversion in the market.
The broader risk-off environment partly shaped by concerns over global growth and heightened market volatility has supported the dollar and limited appetite for emerging market currencies including the rupee. In such conditions, safe-haven flows often dampen expectations of significant currency gains ahead of major central bank announcements.
While recent developments such as the India-US trade deal have buoyed sentiment and contributed to a strong weekly performance for the rupee, analysts note that uncertainty around international economic dynamics continues to weigh on the currency. In addition, pressure on government bond yields and mixed inflation signals have made policy decisions more complex for the RBI’s Monetary Policy Committee (MPC).
Economists have also pointed to broader global monetary dynamics including expectations of policy moves by other central banks as potential influences on capital flows and exchange rate behaviour, further underscoring the delicate balancing act facing policymakers.
With the RBI’s policy stance largely priced into markets, analysts suggest the currency may remain within a tight range unless the central bank signals an unexpected shift in its approach to interest rates or liquidity conditions. A surprise move from policymakers could prompt renewed volatility, but for now, most traders expect a status-quo outcome given the array of domestic and external uncertainties.
Overall, as the global risk environment remains mixed, the rupee’s trajectory will continue to be shaped by the RBI’s decisions, broader macroeconomic signals, and flows in the foreign exchange and capital markets.